In the latest twist to the merger negotiations between LG Semicon and Hyundai Electronics Industries (HEI), LG workers have taken things into their own hands and started a production go-slow. The head of the LG workers union, Kim Joon Soo called a press conference to say he and his co-workers felt they had little alternative but to take the action, which has seen production of DRAM chips cut by 60%, in light of LG Group’s insincere attitude in compensating workers affected by the sell-out to Hyundai. The workers were reacting to a new impasse in negotiations in which HEI has refused to accept LG’s demand that the jobs of all employees be guaranteed for between five and seven years. Hyundai reconfirmed its intent to absorb all LG Semicon employees. But it is impossible to offer employment guarantees to LG Semicon workers for up to seven years, as such a contract may be disadvantageous to Hyundai Electronics employees, said a statement issued by HEI. This was not good enough for LG, which issued its own statement reading: Hyundai’s refusal to guarantee stable employment for LG Semicon workers is disappointing. Worse, Hyundai’s unilateral move to issue a statement even before relevant negotiations are completed is regrettable. In turn, LG’s stance wasn’t good enough for the workforce. However Kim did suggest some compromise possibilities including allowing 30% of LG Semicon employees to take early retirement packages prior to the merger. In the meantime, the production cut will continue with possibly far-reaching consequences on the international DRAM market which has been picking up recently. LG Semicon is the world’s fifth largest producer with production volumes of 15 million 64Mb chips and 25 million 16Mb chips a month. The international market is beginning to show signs of a shortage as demand for PCs increases, and this could push up the prices of DRAM chips,” an industry official told the Korea Times. For LG, it could translate into losses of 5 billion won per day with the union threatening to push the reduction to 90%. The workers’ action also seems likely to prolong negotiations well beyond the latest deadline of the end of this month by when the two companies had promised to have their contract finalized. Even if the employment issue is worked out, HEI and LG still differ by several billion dollars on the issue of price. We continue to believe that LG Semicon as a company could remain competitive and that it is superior to HEI in all aspects, technology and financing included,” said Kang Yoo-shik, LG’s top executive for restructuring, in an indication that if the worst comes to the worst the company is still prepared to go it alone.
